Developers: How Do You Guys Make So Much Money?
Round Rock, TX · Member since 2017 · 86 posts · 45 votes
I put a piece of land under option and went through the whole process of getting quotes for everything for a 36 unit condo project. Below are the numbers I came up with. I have no idea how to make money in development now. What am I doing wrong? (Sorry, I'm sure the formatting will get screwed up when I copy and paste this.)
| Costs | |||||
| Costs that can be financed | |||||
| 43200 | x | $140 | = | $6,048,000 | building costs |
| $75,000 | pool | ||||
| $150,000 | site work | ||||
| $85,000 | land | ||||
| $10,000 | design fees | ||||
| $60,000 | civil engineering | ||||
| $5,000 | legal fees (condo incorporation) | ||||
| $100,000 | developer fees | ||||
| $288,000 | commissions and closing costs | ||||
| $7,000 | web design | ||||
| $6,828,000 | total financiable costs | ||||
| Costs that cannot be financed | |||||
| $1,092,480 | closing and interest costs | ||||
| Total cost | |||||
| $8,208,480 | total costs | ||||
| Total cash cost | |||||
| $6,828,000 | x | 0.2 | = | $1,365,600 | down payment on construction loan |
| $1,092,480 | closing and interest costs | ||||
| $2,458,080 | total cash cost | ||||
| Revenue, Profit, and ROI | |||||
| $200,000 | estimated sales price per unit | ||||
| 36 | x | $200,000 | = | $7,200,000 | revenue |
| $7,200,000 | - | $8,208,480 | = | ($1,008,480) | profit |
| ($1,008,480) | / | $2,458,080 | = | -41.03% | ROI |
